The Gujarat High Court in M/s. Match Graphics v. Union of India and Ors. [SCA No. 21236 of 2022 decided on 13.01.2023] held that the reasons should be stated in the seizure memo, order of provisional release and the order of extension of time period under the Customs Act.
M/s. Match Graphics (hereinafter referred to as the ”Petitioner”) is a private limited company dealing with décor paper printing and purchasing raw materials both domestically and importing it from China. The Petitioner imports raw materials from Kingdecor (Zhejiang) Company (hereinafter referred to as “Kingdecor”) which is a joint venture of a Chinese company Xianhe Company Limited (hereinafter referred to as “Xianhe”) and a German company Schattdecor.
On 11.05.2022, a search operation was carried out by DRI(The Directorate of Revenue Intelligence, Ahmedabad) (hereinafter referred to as the “Respondent No.3”) at the Petitioner’s factory premise and warehouse and detained various raw materials on grounds of misdeclaration of the source of the producer and lower payment of anti-dumping duty on its import.
The Respondent No.3 issued a Panchnama, Supratnama and a Detention Memo under Section 110 of the Customs Act, 1962 (hereinafter referred to as the “Act”) detaining the raw materials valued at Rs. 17,87,55,684/- (Rupees Seventeen Crores Eighty-Seven Lakhs Fifty-Five Thousand Six Hundred Eighty-Four).
On 18.06.2022, the Respondent No.3, further visited the premises of the Petitioner and verified that the raw materials were valued at Rs. 28,07,58,462/- (Rupees Twenty Eight Crores Seven Lakhs Fifty Eight Thousand Four Hundred Sixty Two) and another Panchnama and Seizure Memo was issued under Section 110(1) of the Act stating that the raw materials were liable for confiscation under Section 111 of the Act. .
The Petitioner vide letter dated 18.06.2022 requested the Principal Commissioner of Customs (Preventive), Jamnagar (hereinafter referred to as the ”Respondent No.2”) and the Commissioner of Customs, Mundra (hereinafter referred to as the “Respondent No.4”) for the provisional release of the seized raw materials.
The Respondent No.2 on 27.07.2022 approved the request for provisional release of the raw materials subject to the Petitioner executing a bond of Rs. 24,41,31,320/- (Rupees Twenty Four Crores Forty One Lakhs Thirty One Thousand Three Hundred Twenty Only) under Section 110A of the Act along with an undertaking of pay penalty and interest which may arise in the future and furnish a Bank Guarantee of Rs. 11,00,00,000/- (Rupees Eleven Crores Only).
The Petitioner intimated Respondent No.3 of payment of Rs.25,00,000/- (Rupees Twenty Five Lakhs Only) made to the Commissioner of Customs, Pipavav towards anti-dumping duty on the ground of assurance for co-operation of ongoing investigation.
The Petitioner further replied to the Respondent No.2 requesting that the anti-dumping duty amounted to Rs.82,22,040/- (Rupees Eighty Two Lakhs Twenty Two Thousand Forty Only) and hence, the Petitioner be allowed to furnish a Bank Guarantee for that amount and the raw materials be released.
On 31.08.2022, the Petitioner intimated the payment of Rs. 50,00,000/- (Rupees Fifty Lakhs Only) made to the Commissioner of Customs, Pipavav for assurance of co-operation in the ongoing investigation. The Petitioner had not received any communication from Respondent No.2. Hence, the present petition.
ISSUES BEFORE THE HIGH COURT
CONTENTIONS OF THE PARTIES
Mr. Anandodaya Mishra, on behalf of the Petitioner, submitted that the Respondent No.4 not only allowed the provisional release of the raw materials after the filing of the Petition, but also it was done in a mechanical and arbitrary manner.
Moreover, the Deputy Commissioner, Mundra on 07.11.2022, without the authority of law, has merely communicated the extension of time period for issuance of Show Cause Notice without stating reasons and has resulted in grave arbitrariness.
It was also submitted that on 09.11.2022, the Deputy Commissioner, Jamnagar also extended the time period for issuance of Show Cause Notice without assigning any reason to the same.
It was also asserted that the discretion of provisional release cannot be exercised in a mechanical manner and hence it has led to miscarriage of justice.
It was argued that the extension of time period has to be granted with reasonableness by the Adjudicating Authority as stated in the Act. Moreover, the Order of extension as well as the order of provisional release of the raw materials has not been passed by the Adjudicating Authority empowered under the Act and the orders are passed in a mechanical manner. Moreover, the order of extension as well as order of provisional release are not in accordance to Section 110(1) and Section 110A of the Act, respectively.
It was also contended that the Respondent No.2 and Respondent No.4 have failed to pass the order of provisional release in the capacity of an Adjudicating Authority. Moreover, there is no quantification nor basis for directions stated in the order of provisional release of the raw materials and is not of quasi-judicial nature and there is no judicial application of mind. The order of provisional release has merely communicated the conditions of provisional release.
It was also disputed that a mere suspicion on the part of Respondent No.3 regarding the producer of the raw materials cannot be the ground of confiscation. The Petitioner has already presented the documents supporting that the raw materials have been produced by Kingdecor.
The Respondents argued that the order of provisional release was in accordance to Section 110A of the Act and in terms of Board’s Circular No. 35/2017-cus dated 16.08.2017. It was submitted that out of the 11,00,00,000/- of Bank Guarantee, 6,87,77,186/- was towards the differential duty and the remaining amount was to secure the fine in lieu of confiscation.
It was contended that the Petitioner has not exhausted the available remedy, as an appeal would lie under Section 129A of the Act. Hence, there is no violation of any fundamental right.
DECISION AND FINDINGS
The extension for issuance of show cause notice under Section 110A was not valid in the eyes of law as was issued by an authority other than the prescribed persons under the Customs Act.
The High Court observed that Kingdecor has declared that the raw materials bearing series “XH” and “KD” are produced by them. Moreover, vide Notification dated 28.09.2021, Xianhe has provided the information as an exporter of raw materials and not as the producer. Moreover, the Petitioner has already paid the anti-dumping duty at the rate of 116 USD per metric ton, amounting to Rs.88,22,040/-towards some quantity of the total consignment.
The High Court also observed that the Respondents have not completed the investigation yet. The High Court directed the Respondents to complete the inquiry within 4 weeks.
The High Court further directed the Petitioner to furnish a bond only of Rs.25,00,00,000/- and to disclose the property of Directors, and an undertaking on oath to not part with the raw materials till the completion of investigation within 4 weeks.
The High Court further quashed and set aside the seizure memo issued by Respondent No.3(DRI). The Respondents were directed to release the raw materials as soon as the bond was furnished by the Petitioner.
The High Court in the present case has upheld that every memo or order issued under the Act whether judicial, quasi-judicial or administrative in nature should state the reasons for the same. The Court has quashed and set aside the seizure memo as the reasons are not assigned in it.
It is a trite law that any discretion conferred by legislation has to be exercised diligently along with reasons in a way that the legislative intent is achieved. Moreover, when a particular authority is given the powers for issuing certain orders; it should only be exercised by the designated Authorities.
The present case, was originally argued by Mr. Anandaday Mishra, Founder & Managing Partner, AMLEGALS, who represented the Petitioner in the matter.
– Team AMLEGALS
For any queries or feedback, please feel free to get in touch with email@example.com or firstname.lastname@example.org.